Block trading, also referred to as “crossing,” is a well-known type of securities transaction wherein trades are privately negotiated apart from the public auction market. Block trading allows sell side traders and buy-side traders to reduce transaction costs, such as ticket, execution and settlement costs. While block trading is most often performed through manual negotiation, several matching engines and alternative trading systems have been known in the prior art for matching securities buyers with sellers and for matching securities sellers with pools of liquidity.
Some such matching engines, previously known as Instinet, VT and CBX (the “Instinet Systems”), provided by Instinet, allow users to submit anonymous orders. The systems distribute order alerts to other users of the system who may have interest in performing a transaction with the user whose order triggered the order alerts. When order alerts are distributed and negotiated upon between parties, the parties are anonymous to each other. In this respect, order alerts allow parties to seek a natural counterpart to trade with while controlling information leakage and protecting trading strategy.
Users of such systems control what order information the market sees, showing externally only a minimum execution size and price, while negotiating actual size and price with natural counterparties.
However the Instinet Systems and other matching engines which provide for block trading are limited in several respects. While they have provided a means for continuous off-exchange crossing, they have not provided a sufficient capability to submit orders using market peg benchmarks or future price cross benchmarks via a web based terminal application. While such systems have provided a means for transmitting alerts to subscribers to advise them of potential trading opportunities, no means has existed for permitting the user to control which users or types of users will receive such alerts. Additionally, systems that provide for block trading have typically provided only limited means for negotiation between the parties, and such negotiations were only available to customers utilizing proprietary trading platforms on a proprietary data network.